If you follow Canadian real estate, you might have heard that some cities have—or plan to implement—something called an Empty Homes Tax. Essentially, the tax was created to prevent people from purchasing properties and leaving them vacant for months at a time, which can be a real problem in cities where rental space is in demand. Here’s a bit of background:
How it started.
Vancouver, B.C., was the first city to unroll the tax, early in 2018. The way it works there is that homeowners who leave their home or condo vacant for more than six months of the year have to pay 1 per cent of their home’s total value in taxes, on top of normal property taxes. There are some exceptions to this rule, such as for those who own the home but are travelling, people seeking long-term medical care outside the home, or homes that are unliveable due to renovation.
Other cities plan to follow suit.
In Toronto, it’s estimated that there may be between 15,000 and 28,000 vacant units in the city, where there is already a rental crisis unfolding. As a response, Toronto’s mayor is considering launching a similar tax.
What does this mean for buyers?
The more Canadian cities that implement the Empty Homes Tax, the more care certain buyers will have to take. For example, anyone looking to purchase a secondary home will have to look at renting it out or having someone live in it long-term. This is especially key for foreign buyers, who may already have to pay a Foreign Buyer’s Tax. So, if you’re looking for an investment property, you’ll have to think about who will be living in it, and how you will manage landlord duties.
If you’re thinking of purchasing a home in Canada that won’t be your principal residence, talk to your real estate agent about how the Empty Homes Tax might impact you—and what your options are.